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Fatca requires foreign financial institutions to report to the Internal Revenue Service information about financial accounts held by U.S.
Americans Giving Up Passports Jump Sixfold as Tougher Rules Loom
By Dylan Griffiths | Bloomberg – Fri, Aug 9, 2013 6:59 AM EDT- Getty Images/Thinkstock -
Expatriates giving up their nationality at U.S. embassies climbed to 1,131 in the three months through June from 189 in the year-earlier period, according to Federal Register figures published today. That brought the first-half total to 1,810 compared with 235 for the whole of 2008.
The U.S., the only nation in the Organization for Economic Cooperation and Development that taxes citizens wherever they reside, is searching for tax cheats in offshore centers, including Switzerland, as the government tries to curb the budget deficit. Shunned by Swiss and German banks and facing tougher asset-disclosure rules under the Foreign Account Tax Compliance Act, more of the estimated 6 million Americans living overseas are weighing the cost of holding a U.S. passport.
"With the looming deadline for Fatca, more and more U.S. citizens are becoming aware that they have U.S. tax reporting obligations," said Matthew Ledvina, a U.S. tax lawyer at Anaford AG in Zurich. "Once aware, they decide to renounce their U.S. citizenship."
Fatca requires foreign financial institutions to report to the Internal Revenue Service information about financial accounts held by U.S. taxpayers, or held by foreign entities in which U.S. taxpayers hold a substantial ownership interest. It was estimated to generate $8.7 billion over 10 years, according to the congressional Joint Committee on Taxation.
Delaying Implementation
The 2010 Fatca law requires banks to withhold 30 percent from "certain U.S.-connected payments" to some accounts of American clients who don't disclose enough information to the IRS. While banks can sign agreements to report to the IRS individually, many are precluded from doing so by privacy laws in their jurisdictions.
The Treasury Department last month announced that the IRS will delay the start of Fatca by six months until July 1, 2014, to give foreign banks time to comply with the law. The extension of the act follows a previous one-year delay announced in 2011.
Financial institutions including Canada's Toronto-Dominion Bank (TD) and Allianz SE of Germany have expressed concerns that Fatca is too complex.
The latest delay comes after the Swiss government agreed in February to simplifications that will help the country's banks implement Fatca.
Penalty Threat
"The United States wishes to ensure that all income earned worldwide by U.S. taxpayers on accounts held abroad can be taxed by the United States," the Swiss government said on April 10.
Since 2011, Americans, who disclose their non-U.S. bank accounts to the IRS, must file the more expansive 8938 form that asks for all foreign financial assets, including insurance contracts, loans and shareholdings in non-UNN.S. companies.
Failure to file the 8938 form can result in a fine of as much as $50,000. Clients can also be penalized half the amount in an undeclared foreign bank account under the Banks Secrecy Act of 1970.
The implementation of Fatca from July next year comes after UBS, Switzerland's largest bank, paid a $780 million penalty in 2009 and handed over data on about 4,700 accounts to settle a tax-evasion dispute with the U.S. Whistle-blower Bradley Birkenfeld was sentenced to 40 months in a U.S. prison in 2009 after informing the government and Senate about his American clients at the Geneva branch of Zurich-based UBS AG.
Compliance Costs
The additional compliance costs for companies to ensure that Americans they hire are filing the correct U.S. tax returns and asset-declaration forms are at least $5,000 per person, said Ledvina.
For individuals, the costs are also rising. Getting a mortgage or acquiring life insurance is becoming almost impossible for American citizens living overseas, Ledvina said.
"With increased U.S. tax reporting, U.S. accounting costs alone are around $2,000 per year for a U.S. citizen residing abroad," the tax lawyer said. "Adding factors, such as difficulty in finding a bank to accept a U.S. citizen as a client, it is difficult to justify keeping the U.S. citizenship for those who reside permanently abroad."
To contact the reporter on this story: Dylan Griffiths in Geneva at dgriffiths1@bloomberg.net
To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net
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Americans Giving Up Passports Jump Sixfold as Tougher Rules Loom
Though I am not one of the people giving up their passports I feel for the people that are giving up their passports in order to not go broke. Creating and maintaining wealth or just trying to make enough money to feed yourself for the next week depending upon your circumstances is difficult.
It all depends upon how your finances are set up. If someone improperly set up your finances and because of extreme capital gains taxes you cannot change the way they are set up without going bankrupt I can see why many people are giving up U.S. passports as an alternative to going broke and dying penniless, especially if they are over 50 years of age. Often this might be the only way forward for these people to do this because of more and more stringent rules in places like the U.S. and Great Britain and others.
Here is just one example of how this problem manifests: Franklin Delano Roosevelt promised to get rid of Inheritance taxes before he left office. However, he died before he could do this. As a direct result of this 50% of each estate must be given to the government for someone to inherit anything. Often this causes a family to sell a farm or a business in order to pay this 50%. As a result many many many people are forced into bankruptcy across the nation when they are forced to sell a farm or business in a bad market like the one we had during the last 5 years. This has devastated families across the U.S. through bankruptcies, broken homes, homeless people, people who no longer could go to college or even sometimes to public school for a variety of reasons.
The only people who have benefited much from the upturn in the economy have been stockholders because 2/3 of the recovery has been in the stock market. But most people cannot afford to invest in the stock market because of the volatility. So, once again only people who can afford to live without the money they invest can benefit from the changes to the stock market and the stock market has been 2/3 of the actual recovery of the U.S. economy.
Also, I talked to someone about this last night and they said that someone could make up to 100,000 dollars while living in a foreign country without having the kinds of problems they are talking about above. However, since I have never worked in another country and had to worry about this I don't know whether this is completely true or not. I do know all this kind of thing varies to some degree from country to country because of all the different laws that apply there to you when working there and under the jurisdiction of that country.
However, in many instances it does appear to be easier for people from the U.S. to get jobs elsewhere than getting jobs here, especially if they have a degree in anything from a college or university.
If you have a Bachelor's degree from a U.S. college or university in literally anything and you are under 40 or 50 years of age likely you can get a job teaching English in another country like Korea, Japan or China quite easily. However, then the question becomes are you the type of person that would be okay doing that or actually enjoy that sort of thing?
Also, you likely would need to get some kind of Internet or actual training regarding TEFL (teaching English as a Foreign Language) certification.
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www.wikihow.com › ... › English › English as a Second Language (ESL)Would you like to travel the world teaching English? Getting certification before you go will help you to get a good contract and show you what to do before you ...Teaching English as a foreign language - Wikipedia, the free ...
en.wikipedia.org/wiki/Teaching_English_as_a_foreign_languageTeaching English as a foreign language (TEFL) refers to teaching English to students ... institutions it is possible to teach without a degree or teaching certificate.Also, if you are serious about teaching English in a foreign country you also could become a volunteer teacher at a public school or private school here until you get hired abroad. However, in places like South Korea for example, public schools are a better guarantee of actually getting paid regularly than private schools so these kinds of things you have to watch out for too.
